Here's Why We're Wary Of Buying Saudi Manpower Solutions' (TADAWUL:1834) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Saudi Manpower Solutions Company (TADAWUL:1834) is about to trade ex-dividend in the next 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase Saudi Manpower Solutions' shares on or after the 8th of April will not receive the dividend, which will be paid on the 20th of April.

The company's next dividend payment will be ر.س0.13 per share, and in the last 12 months, the company paid a total of ر.س0.24 per share. Based on the last year's worth of payments, Saudi Manpower Solutions stock has a trailing yield of around 3.9% on the current share price of ر.س6.20. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Saudi Manpower Solutions paid out 114% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance.

View our latest analysis for Saudi Manpower Solutions

Click here to see how much of its profit Saudi Manpower Solutions paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Saudi Manpower Solutions's earnings per share have fallen at approximately 5.6% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Given that Saudi Manpower Solutions has only been paying a dividend for a year, there's not much of a past history to draw insight from.

The Bottom Line

Has Saudi Manpower Solutions got what it takes to maintain its dividend payments? Earnings per share are in decline and Saudi Manpower Solutions is paying out what we feel is an uncomfortably high percentage of its profit as dividends. It's not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

With that being said, if you're still considering Saudi Manpower Solutions as an investment, you'll find it beneficial to know what risks this stock is facing. To that end, you should learn about the 2 warning signs we've spotted with Saudi Manpower Solutions (including 1 which is a bit unpleasant) .

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.